The hard-hitting report said current provision was "unsustainable" and revealed only half of all new childcare providers had a clear idea about how they would continue when their start-up funding ended.
It also pointed out that although 626,000 new childcare places have opened since 1998, 301,000 have closed.
A lack of sustained funding, high staff turnover, competition from other providers and bad business planning were all cited as problems. "Many existing providers fail to cover their costs - and significant numbers lack the sufficient understanding of their costs to judge their future viability," the report claimed.
Two-fifths of day nurseries and 34 per cent of playgroups did not know how many places they needed to fill in order to cover their costs.
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